F&P Quarterly: Back to basics – Highlights from NIRI 2016

Last week, hundreds of Investor Relations professionals from across the world, gathered in San Diego to take part in the NIRI 2016 event. Topics covered included current trends in Investor Relations, Corporate Governance and Financial Media.

Fogel & Partners were there to find out the latest in the world of Investor Relations.

The main take-away during the three-day conference are summarised below.

1. Communications plays a vital role in the success of a transaction

Investor Relations, media relations and internal communications play a vital role in securing a successful M&A, IPO or other transaction. The key to success is to analyse the information needs of shareholders, employees and customers and the timely delivery of the right information and messages to gain their support for the transaction are more vital then ever.

2. The Investor Relations function needs to be deeply rooted into the organization

Successful communications with the financial markets require the Investor Relations function to spend a lot of time understanding its own business and organization. The internal and external networking makes this role unique with a 360-degree view on markets, business, competition and stakeholder demands. Once you have achieved this level of understanding of the business and have built trustful relationships with key stakeholders, you will be highly valued source of information, both internally and externally. If you are not already part of the group management team, your prospects of achieving this, will be at reach.

3. Conference calls with enough time spent on Q&A

A common mistake is to spend too much time to present the quarterly results, leaving very little time for questions. The right mix is to allocate at least half the earnings call to Q&A allowing all questions to be answered. The time spent on presenting your results should provide colour and further insight to understanding the medium and long-term development during the quarter in relation to previously announced outlook.

4. Focus on market development, goals, strategy and business plan

Investors are very clear about what they want from the companies they invest in. The decision to buy, hold or to exit requires a reasonably detailed understanding of your market position, your long-term competitive advantages, main value drivers, your goals, strategy and plan. So spend the main part of meetings to share your view on these topics rather than on details on quarterly results.

According to investors, the most valuable sources of information are management meetings and investor presentations. Corporate websites are of course important but analysts and investors mainly go there to download presentations and quarterly reports.

Companies need to come up with long-term metrics to talk about with investors, as existing ones tend to focus too much on the short-term. Companies can for example include quality of talent, rate of innovation and staff turnover. As part of a more long-terms focus they need to target investors who are likely to stick with management through short-term volatility.

Shareholder activism

Still, activists are increasingly pressing for structural changes rather than just carving out share buybacks and dividend. Balance sheet-related requests were just 11 per cent globally in demand in 2015, down 6 per cent in 2014. Activists are much more focused on strategic and operational issues, including M&A and spin-offs.

Keep track of the ever-changing media landscape

The media industry is still highly influenced by new technology and business models. Senior editors from Bloomberg presented the latest trends and highlighted that even though channels and business models continue to develop, good old fashioned media relations is as important as ever. If you manage to establish a mutually beneficial relationship with key journalists, your chances of getting your story out improve, both regarding the news you want to share and in a crisis situation.

In a crisis situation, you should focus on providing fast and factual updates about the situation, explaining also why it happened, actions taken and the lessons learned. This is crucial in order to secure continued high trust in the management team and Board of Directors of the company.

Nothing new, but still best practice

To summarise, this might all seem like straightforward advice but is actually far from everyday practice among companies. Never forget to listen to the needs of your audience, know your business and build trustworthy relationships – these might just be the factors that will make you stand out in a world where everyone competes for attention, and, most important, that will give the company a fair valuation no matter the general market sentiment.